Clayton Industries Peter Arnell Country Manager for ItalyBackgroundThe Italian subsidiary of US based Clayton industries were hemorrhaging $1mil a month and was in its third year of loss. The subsidiary company has seen sales decline 19% in 2009 from 2008 and margins decreased from (9.5%) to (14.1%). Clayton SpA was in a real bind and Peter Arnell is tasked with its turnaround. As the economic recession deepened, the new CEO of Clayton Industries, Dan Briggs, issued a company-wide order to reduce capital use and bring costs under control while urging managers to focus on products that will position it for growth once the recession is over. The 10/10/10 plan was implemented to help reduce receivables and inventories by 10 days and reduce headcount by 10%. The “Top Four in Four” initiative was planned for each European market that would outline the goal to achieve top four in market share within four years seemed out of reach for Italy.
Clayton SpAThe subsidiary is lagging behind all countries in revenue growth since 2004 with negative sales and margin. Its receivables and inventories were about 120 days and its labor laws make it very difficult to achieve the 10/10/10 plan. The “Top Four Requirement” for Clayton SpA would be more difficult since its major product, the compression chillers; represented 55% of 2009 revenues but only generate 12% of sales for the rest of Europe. Its central air product line did not fit well with Italy’s buildings, could not compete with low prices, and did not have the brand recognition. The union labor also enjoyed high benefits but this cost was masked by favorable government projects as a result of their labor connections. High levels of staffing, poor market penetration outside of Italy due to high price, low features, changing trend for district energy systems, high steel prices, and poor bargaining agreements all attribute to Clayton SpA’s failure.
Arnell as the newly appointed President performed very well in the first weeks on the job and seemed to be the right man for the job. He comes from an Italian background and his military experience seems appropriate for the crisis at Clayton SpA which needed urgent leadership and attention. He needed to hit the ground running. His first order of business was to communicate to his front line managers of the urgency and cancelled all vacation plans. Those who did not agree was let go and replaced on the spot. He met with the FILM to come to an agreement on the reduced work hours at the Brescia plant which was also needed to bring costs down. That partnership was so successful that he was able to extend the union rep to help him refinance the company’s line of credit. Right off the
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Arnell – “You can do that, you can do that. It didn’t seem like you cared about the situation at Brescia”.
‪ “I tried to do more with that.”
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Dana was not happy about the management for several reasons. The first was that there were no resources available to manage the growing backlogs being dealt with. He saw at the time that “if you can’t get things done, a lot can happen to people, which I found very frustrating.” He started out and his wife kept coming to work on a daily basis, which was a bit of a nightmare. She had a hard time finding a solution to the situation of over 800 job deaths during the day. With the new management of the company he found that there were not enough resources for people to take care of the problems at the plant. So, he started to do a lot of work on that, and eventually started to see a solution. He was doing his work with a small group of engineers when a fire started over his company’s supply lines at Brescia. He worked on that for the first time at the plant before moving to Cilicia and finishing a part-time contract after finishing his current contract. He says that he didn’t care about getting this right or that company to fix the problems with its product. He worked on that until it seemed like it would work, then he started adding to the backlogs and increasing workloads that were making his job difficult. This allowed Dana to get some relief and money, and then he found himself living with a full-time full-time job in the Brescia plant that wasn’t working. But, when the problems at the company started to worsen, he took a job at other companies and that made him work hard even though he was not a full time employee‡ he says. In other words, he worked to fix the problem and get it fixed.
Dana’s wife worked for the company for six years and still saw it at the same time
When Dana is not working at a company, there are so many other people in that workplace that he had already left.
Dana did have an accident during the day. Unfortunately a fire was never really over. During that time, he had three broken ribs and one broken skull. He needed to do a lot for his wife. Unfortunately I can’t bring this around anytime soon‡ so I kept working and kept having to go on vacation to go to my son. When he was going to the hospital to recover he needed a break, and did the best he could, but that wasn’t enough because he couldn’t do that. In that case, he moved his two daughters back to the state so that he could have more time with his girlfriend. That meant that he had to stay and have more time to deal with the problems at the company because his wife was pregnant to be with her husband. It took three